In a few short years China’s patent system has gone from an IP rights wannabe to one of the most responsive and patent-friendly systems in the world.

Leading U.S. IP experts say that underlying this rapid evolution is a desire for China to become a science and technology powerhouse, with the ability to create new and formidable industries that employ many of its 1.4 billion people.

“China wants to be an innovation leader for multiple reasons,” Irv Rappaport, former Chief Patent Counsel at Apple and National Semiconductor, who served on the Uruguay Round of GATT, told IP CloseUp recently. “It is fascinating to see how the U.S. patent system is imploding, while the Chinese system is exploding with activity and purpose.

“For more than a decade the U.S. has been emasculating its patent system, while the Chinese have been studying it and adopting the benefits of a well-coordinated and fast-moving one. The U.S. has gone from being on the global cutting edge in IP in the 1990s, to becoming a patent backwater, because of a well-heeled, anti-patent faction among technology companies that want to stifle competition.

“Train Wreck”

“China has watched the U.S. train wreck and is moving fast to fill the void,”continues Rappaport. “It wants to become the world’s ‘Eastern District of TX,’ that is, a fair and fast adjudicator of disputes that respects patent holders’ rights. China will soon be the world’s largest economy with the biggest population and a middle class the size of England, France and Germany combined. Their commitment to innovation can not be ignored.”

Peter Holden, CEO of ipCreate and former managing director with London-based Collar Capital and a founding executive with IP Value, has worked extensively with Asian companies and patents. He has traveled to Korea, China and Japan more than 100 times over the past twenty years. “The Chinese have learned from the U.S. and are sincere about making their IP system the best — one that will encourage innovation and help their nation to become the economic leader. It is not merely a thought. It’s an idea that they are dedicated to.

“China’s attitude towards foreign patent enforcement may not always be as generous as it is currently. It knows that it needs to bend over backwards to be fair if it is to be taken seriously on a global scale. To encourage competition there needs to be a level playing field.”

Counterfeits Still Rule

But China’s record on counterfeits is poor, with everything from luxury goods to pharmaceuticals sold domestically and exported globally. According the U.S. International Trade Commission, Chinese theft of U.S. IP in 2009 alone cost almost one million U.S. jobs and caused $48 billion in U.S. economic losses.

“Counterfeit goods are still an issue for China,” says Erick Robinson, a patent attorney in Beijing and author of Defending a patent case in the brave new world of Chinese patent litigation, in the current issue of IAM magazine. “However, sales of fake goods are no longer openly accepted and the government has been on the war path trying to stop them in different ways. Authorities know that in order to be taken seriously about IP rights, they cannot ignore the problem of counterfeit goods.”

China is just beginning to build its giant tech companies. They have succeed with Alibaba and Huawei, and acquired Lenovo from IBM, which is now a $45 billion (USD) business. Their big businesses currently have less to lose from strong patents and quick dispute resolution than those in the U.S. and Europe. To create successful businesses and attract investment, incentives need to be provided, and strong patents and a reliable legal system for adjudicating disputes are great for encouraging that.

Perhaps when China has as many big tech players as the U.S. it will start to think more defensively, but for now it is the perfect setting for encouraging new ideas with strong patents and courts that make it easy to obtain injunctions.

“It’s interesting that the Chinese are encouraging large foreign corporations to sue non-Chinese companies in China,” opines Rappaport. “This suggests that they are looking to become the patent litigation go-to jurisdiction.” As their innovation grows and becomes more complex, I believe they will have less interest in exporting cheap knock-

offs. Their IP path is similar to that followed by many of today’s developed economies, such as Japan and South Korea. You start off copying others and gradually move to internal innovation.”

Despite China’s success in facilitating stronger patents and more decisive courts, a huge question is just how prominent a role will patents play in new companies in a data-driven information age.

“Given the accelerating pace of technology development and nature of discoveries, which are frequently software driven, it’s not clear whether existing patent systems can remain relevant in the longer term,” says Rappaport. ” This effect may partially explain why patents currently seem to be less relevant in the U.S. It remains to be seen whether this is a longer term development. It is a development that needs to watched.”

“100% Win Rate”

“Trust the Chinese government to do what is best for the Chinese people,” reminds Beijing-based Robinson. “It’s less about assisting foreign patent holders than establishing a really viable IP system that encourages innovation and growth, and that attracts foreign investment. Forty-percent of the smart phones in India are currently manufactured by Chinese companies. Innovation coupled with enforcement will drive China’s new businesses and help them grow.”

As reported by Robinson in IAM, “foreign plaintiffs notched a100% win rate [65 – 0] in civil cases heard by the Beijing IP Court last year, according to a judge who has been on its rostersince it was established in 2014.”

Wake-Up Call

A decade of weakening has taken its toll on the U.S. patent system and patent holders. It will not be quick to recover unless a concerted effort can be made to take IP rights seriously. Allowing U.S. patent policy to be dictated by those with the greatest financial success and market share may be appealing to shareholders, but it is not necessarily what is needed for the nation to remain competitive in a global economy, and to generate new businesses and jobs.

Hopefully, the wake-up call comes soon for the U.S. and it can retain the title of innovation leader it has held since the 19th Century but is slipping away.

The Kearns article, detailing his 12-year patent suit with Ford and other auto companies, has generated 31,081 hits since it was originally posted in 2011.

Renewed interest in the Kearns biopic detailing the inventor’s patent suit, “Flash of Genius,” starring Greg Kinnear and Alan Alda, likely stimulated interest in the topic, as well as new obstacles to patent licensing.

An article summarizing inventor Robert Kearns’ epic battle against the automobile industry is this year’s most read IP CloseUp post with more than 21,000 visits.

The post summarizes the twelve-year patent suit mounted by Kearns, the inventor of the intermittent windshield wiper, against Ford and much of the automobile industry in the 1980s and 1990s, for stealing his invention.

It could have something to do with the 2008 movie, Flash of Genius, that memorialized Kearns’ battle and depicted how it contributed to his mental breakdown and loss of his family.

Bittersweet Victory

Flash of Genius, starring Greg Kinnear as Robert Kearns and Alan Alda, as Gregory Lawson, his ambiguous attorney, opened to mixed but generally positive reviews (59% Tomato Meter; 55% Audience Score). It had a $20 million budget but grossed just $4.8 million at the box office. (Alda, of M*A*S*H fame, BTW, is a champion of understanding science and innovation, and founded the Alan Alda Center for Communicating Science at Stony Brook University.)

The movie has many fans. I suspect that when it it is streamed or runs on a movie channel curious viewers run to Google hopeful of learning more about the enigmatic Kearns and his dispute with auto giants. It pitted him as David to their Goliath. (Thanksgiving weekend alone, which is prime movie-watching time, there were more than 1,500 visits to the post on IPCU.)

Even though Kearns eventually won significant awards, $10.2 million from Ford, and a total of $30 million from Chrysler, it is easy to believe that the struggle, which cost him his family and affected his sanity, may not have been worth it.

Apparently, no one thought so except Kearns, a college professor, former cryptographer in WWII and officer at a U.S. agency that was the forerunner of the CIA. (See the link to his obituary on the original IP CloseUp post, above.)

High Search Ranking

The Kearns’ post’s popularity probably also has something to do with its high Google search ranking under Kearns’ iconic name. It’s the second item after a rather tepid Wikipedia entry.

Supporters of the film include Peter Travers, long-time film critic for Rolling Stone. He gave it three out of four stars, saying “Kinnear takes the star spot in Flash of Genius and rides it to glory… Kearns wasn’t a movie hero. His halting courtroom delivery lacked Hollywood histrionics. Kinnear plays him with blunt honesty, sagging under the weight of stress but maintaining a bulldog tenacity that would win the day. Was the battle worth it? Kearns’ conflict is readable in Kinnear’s every word and gesture. His performance is worth cheering”.

Stephen Holden of The New York Times called the film “a meticulously constructed mechanism, one that wants to convey the same mixture of idealism, obsession and paranoia found in whistle-blower movies like Silkwood and The Insider,” thought it “has the tone and texture of a well-made but forgettable television movie”.

Lead actor Greg Kinnear, who in the lead role is more likable than Kearns was, won the Boston Film Festival Best Actor Award for his portrayal.

The Kearns story strikes a chord deep in everyone. It is a quintessentially American tale of the forward-thinking little guy against diverse array of nay-sayers, his family included. Kearns’ sincerity as an engineer who craved recognition for his work more than his financial security is not lost on audiences, who seeFlash of Genius, weaknesses aside, as an emotional and somewhat cautionary tale that is difficult to forget.

____________________

Whether it was ego, anger, greed, or a combination, that ultimately motivated Kearns to go as faras he did for as long, the inventor’s greatest accomplishment may not be the valuable device he created, which no doubt helped save lives, but his perseverance and drive to prove that it was stolen from him.

___________________

Whether or not Kearns was selfish or unbalanced, patent holders have benefited from his trail-blazing determination and refusal to take settlement money when he needed it most.

Stacked Deck

The environment for inventors and innovative small businesses today who wish to license their rights is not much different from when Kearns fought his epic battles. In fact, the obstacles may be worse.

With “efficient” patent infringement the preferred strategy of many the leading technology companies today, and higher validity and patentability hurdles established by the Patent Trial and Appeal board and the courts, the deck continues to be stacked against IP holders – even those with the capital, time and patent quality to succeed.

[Note: A company that employs “efficient” infringement believes that it is highly unlikely it will be caught using an invention it is not entitled to, and if it does, it is unlikely that it will have to pay much. For them, choosing not to take a license unless forced to by the courts is in their view a prudent business decision, ethics aside.]

Flash of Genius is available from Amazon, iTunes and other sources, to stream, rent or buy. Recently, it became available to Netflix subscribers for free. The official movie trailer can be seenhere.

For those interested in the topic of Kearns and independent inventing, the long and thoughtful 1993 New Yorker magazine article by John Seabrook on which the movie is based is not to be missed. It is available for free by going here.

After a record-breaking first quarter, public IP company shares (PIPCOs) under-performed most stocks versus the S&P 500 index in the second quarter.

Following a five-year leading return of 13.1%, vs. 0.8% for the S&P 500, the PIPX IP Sector Index of 13 patent licensing stocks fell in the second quarter -4.4% vs. a 1.9% gain the broader market index.

Bucking the trend was Marathon Patent Group (MARA), which was up 37.7% on settlement activity. Despite and increase in its shares of 16.1% in the second quarter, Acacia Research (ACTG) is rumored to be exploring combining with a pre-IPO business because of the difficult environment for patent licensing.

“Acacia may acquire a pre-IPO business, allow struggling IP business to wind down, former employees say.” reports the Patent Investor.

“The value of $1 invested in the S&P 500 in Q3 2011 would now be $1.57 while the value of the same $1 invested in the PIPX would be $0.56,” says Dr. Kevin Klein, who compiles the PIPX for IP CloseUp,”

The PIPX IP Sector Index is a capitalization-weighted, price-return measure of the change in value of this segment of publicly traded companies. This means that the performance of larger companies like InterDigital, Rambus and Tessera have a proportionately larger impact on overall index performance than swings in smaller public company shares followed.

Speakers include Nick Psyhogeos, President of Microsoft Technology Licensing LLC, Kevin Rivette, co-author of Rembrandts in the Attic, and a former Apple,IBM and Nissan advisor, and William Coughlin, President of Ford Global Technologies.

IP CloseUp readers are being offered an exclusive discount of $150 off the full delegate rate. Register here by April 29 for an opportunity to network with over 100 thought and market-leaders. Use code IPCLOSEUP3 to receive the discounted rate of $745.

On April 12, Ford made public plans to build a state-of-the-art world headquarters campus designed by SmithGroupJJR, the same architecture and engineering firm that designed offices for Google, Microsoft and Tesla.

The redesign comes as automakers compete with Silicon Valley and Seattle to hire engineers, designers and other tech-savvy workers who will design the autonomous and electric cars of tomorrow.

Ford’s corporate-campus overhaul comes as Toyota is preparing a new North American headquarters in Plano, Texas, and as General Motors continues a $1 billion renovation of its Tech Center operation.

“The focus on IP in the auto industry has intensified at all levels,” said Richard Lloyd, conference producer and North American Editor of IAM Magazine. “Issues such as branding, reputation management and counterfeiting are moving up the corporate agenda, while technological convergence means that patent protection and enforcement, licensing and collaboration have become more important than ever.”

IP in the Auto Industry will feature contributions from over 25 industry-leading companies, addressing the following issues:

The post about the continued anger of inventor Robert Kearns family over his treatment by automobile makers, depicted in the movie, “Flash of Genius,” was the most popular for 2015, with, with 6,760 visits. It continues to be a perennial favorite.

The second annual IP Dealmakers Forum, December 7 – 8, will bring together leaders from the finance, legal and business communities to discuss the issues affecting patent licensing, sales and value, and to facilitate transactions.

New this year is a separate workshop for institutional investors that focuses on understanding IP as an asset class. This invitation-only, closed-door workshop will address the characteristics, market size and scope of patents as business assets, discuss practical investment issues, and examine the current investment universe. For additional information, go to here.

Luncheon Keynote

This year’s luncheon keynote is Edward Jung, co-founder and Chief Technology Officer of Intellectual Ventures, which holds more than 70,000 patents. After leaving Microsoft where he was Chief Architect, Jung founded IV in 2002. As CTO, Jung sets strategic technology direction and new business models for the company. He holds more than 750 patents worldwide with has an additional 1,000 pending in the areas of biomedicine, computing, networking, energy, and material sciences.

The keynote topic is “Driving Deals Through the Patent Storm”

Other speakers, at the New York event which will be held at the Apella event center overlooking the East River, include chief or senior executives from leading IP holders, both NPEs (non-practicing entities) and operating companies, institutional investors, financial institutions and PIPCOs (public IP licensing companies), including

IP CloseUp readers can still save $200 on Forum registration by using promo code “IPCloseUp_Special”. A special landing page has been created for IP CloseUp reader registration: http://www.ipdealmakersforum.com/ipcloseup/

Last year’s inaugural event connected diverse intellectual property monetization experts with public and private market investors, and was attended by approximately 200 investors, IP executives, and advisors. Due to popular demand, expanded space will be provided in 2015 for private one-on-one meetings.

Changing Times

“These are changing times,” said Ashley Keller, co-founder of Gerchen Keller Capital, and a scheduled speaker at this year’s Forum. “As the market shifts, understanding the increased importance of due diligence expertise, the changing perceptions of risk and valuation, and the sources and expectations of those with investment capital, is a prerequisite for anyone who intends to succeed in this arena.”

Uncertainty is putting pressure on patents, trademarks and copyrights. All are facing more scrutiny and a challenging future.

Scrutinizing these fundamental issues on December 3rd and 4th in Berlin will be more than 600 IP holders, executives and investors attending the Intellectual Property Summit. Organized by Premier Cercle, it will be the tenth edition of the popular conference, held previously in Paris and Brussels.

This year’s Summit will attempt to deconstruct global IP trends and explore the future of IP rights – patents, trademarks, copyrights and trade secrets – as business assets. There will be 100 speakers from Europe, North America and Asia.

When it comes to invention rights (patents) it is often difficult to determine who is a victim and who is merely promoting its agenda.

Life360, which markets the world’s largest family tracking app, says it is being unfairly targeted by what it calls a patent troll, Advanced Ground Information Systems Inc.(AGIS). SF-basedLife360, which has raised $50 million from security giant ADT, says it wasting its capital on defending itself from AGIS, a company that makes tracking equipment and software for the military and first responders. But that is only part of the story.

In a video interview last week on Bloomberg News, Life360 CEO Chris Hulls, a former Goldman Sachs banker who spent time in the U.S. Air Force, said that “We believe it to be meritless suit from a troll. Life360 is helping people. Our product is one that saves lives, and its ridiculous that we have to defend ourselves in court.”

In a letter from Life360 to AGIS, Hulls wrote: “Dear Piece of S***, We are in the process of retaining counsel and investigating this matter… I will pray that karma is real and that you are its worthy recipient.”

In the patent world holders and their patents are not always as good or bad, or right or wrong, as they might appear. The “bad” guys in licensing are sometimes bottom-feeders looking for a quick payout given the high price of litigation, but, more often than not, they are legitimate holders of valid patents that are being used without authorization. Infringers sometimes invent four of five-letter words terms for those who expect to be paid for their inventions. Thus, it may be opportune for a a business edit the story to suit its needs. This appears to be the case with Life360.

The Court of Public Opinion currently is a more powerful ally to a patent infringer than it is to a small holder whose rights have been violated. Patent infringement is not a victimless crime. Unfortunately, it is not always clear who the real victim is.

Inventor-owned Patents

Envision IP, a law firm which focuses on patent research, says that it is unlikely that AGIS is a “troll.”

“The four patents it asserted against Life360 list AGIS as the original assignee – so these patents were not purchased or acquired by the company,” said Maulin Shah, Managing Attorney. “The suit is filed in the Southern District of Florida, apparently in AGIS’s backyard, and does not appear to have pursued an
explicitly patent-friendly jurisdiction like Texas, Delaware of the Eastern District of Virginia.” (The suit lists Jupiter, FL the company’s address.)

Envision IP, which conducts invalidity studies, says that the complaint against Life360 is the only patent infringement lawsuit currently filed by AGIS, and it has not asserted its patents against any other companies. (Life360 is one of 25 defendants sued by an NPE called Remote Locater Systems LLC.) Also, AGIS appears to be an active operating company that has been filing annual reports since 2004. “It does not seem that the entity was formed as a shell used solely for patent licensing/enforcement purposes,” says patent attorney Shah.

Additionally, AGIS is represented by Kenyon & Kenyon, a highly respected law firm known for defending large operating companies, like Bosch and Siemens. Kenyon represents precious few if any plaintiffs, and it is highly unlikely that it would agree to represent AGIS if the case were truly meritless. But, then, you never know.

Life360 to the Defense

Life360 Inc. said last week that it will provide legal support for other small companies sued by Advanced Ground Information Systems Inc. So far, according to Envision IP, it does not appear that any have. Jupiter, Florida-based AGIS sued Life360 in federal court in West Palm Beach, Florida, in May 2014, accusing the California company of infringing four patents related to mobile-phone communication.

In a Feb. 3 statement, Life360 said that in addition to assisting others who are accused of infringing the disputed patents, it has filed a countersuit (click on View Complaint) in federal court in San Jose, California, accusing AGIS of marking all of its products with its patents regardless of whether the patent contains a claim covering the product. Life360 is represented by the Bergeson, LLP, a Silicon Valley law firm, in that matter. It is unclear who is representing it in defending against the patent suit.

According to PandoDaily six-year old Life360 has now raised a total of $76 million from more than a dozen investors that include Duchossois Capital Partners, BMW i Ventures, Facebook, Google, Expansion Venture Capital, DCM, and Bessemer Venture Partners.

Potential for an Injunction

Perhaps Life360’s greatest fear – and hence its high-profile defense – is that if AGIS can show that it is an operating company, and one that supports the military and first responders, it can potentially use an injunction to stop Life360 from selling its app, effectively shutting the company down. Much of this could be saber-rattling to enhance the parties’ respective negotiating position. But for Life360 its defense in the AGIS suit may indeed be a bet-the-company-matter.

According to the complaint (page 3), AGIS’s founder, Malcolm Beyer Jr, who is named as an inventor on the asserted patents, is a former Marine, and graduate of the US Naval Academy. He developed AGIS’ patented technology “shortly after September 11, 2001.” The commercial product based on the patents is called LifeRing. (The page explains the product features and provides a market comparison.)

Whatever the outcome, going public with a “damn-the-troll” defense, as Life360 has, is looking old and worn, even if it can still sometimes work. Allegations like those are outside the merits of the case, and from the preliminary research, will be difficult to prove.

The stock market continues to defy expectations. Even more surprising, a few PIPCOs have dramatically outperformed it. Smaller cap patent stocks have not fared so well.

A handful of patent licensing companies are poised to end 2014 on a resoundingly high note. Early indications are that InterDigital and Tessera Technologies are among those that have likely benefited from the positive momentum generated in the fourth quarter, fueled by a 67-month bull run.

With the S&P 500 up 11.44% at the close of trading on December 9, Tessera (NASDAQ: TSRA) is up 82.39% YTD, and most of that in the fourth quarter. It was up “only” 34.9% through the third quarter. (See TSRA’s performance through the third quarter in the Freescale chart below.)

Unwired Planet (NASDAQ: UPIP) on the other hand is up 8% YTD after having been up 35.5% at the end of the third quarter, dropped dramatically in the fourth quarter. InterDigital (NASDAQ: IDCC), up a respectable 35% at the end of the third quarter, is currently at 81% YTD. Another beneficiary of good tidings and market momentum. IDCC, TSRA and, to a lesser extent, Rambus (NASDAQ: RMBS), have been quietly generating credibility for patent licensing stocks. (In a future IP CloseUp we will be analyzing their largest investors.)

Many Nanocaps Suffer

Many of the nanocaps, PIPCOs whose market capitalization does not exceed 100M, continue to be down for the year and quarter. Some like ParkerVision, Vringo and VirnteX have been dragged down by adverse decisions in court. Others, like DSS and Inventergy have had difficulty showing they can turn patent licensing into a sustainable public business. Notably, IDCC, which ballooned to $75.72 on August 7, 2011, a five-year high, has steadily climbed back up to $53.39 after sinking as low as 25 on July 22, 2012. Some patent licensing stocks appear to be more resilient than others. Often that grit is based on (1) cash flow and (2) cash on the balance sheet. (Cash was king long before Lebron.) Stay tuned to see how the year will end for PIPCOs and which companies have been able to take advantage of the still running bull.

Bad actors no more define all NPEs than they do all high-tech companies, even though many use inventions without paying.

A nasty dispute involving an angry online entrepreneur shows to what lengths some people are willing to go to fan the flames of anti-patent fire.

FindTheBest CEO Kevin O’Connor, co-founder of web ad firm DoubleClick, decided several weeks ago he would go public with his attack by what he terms patent “trolls” and worse.

Ars Technica reports that “O’Connor wrote to tech sites likePandoDailytelling them of his determination to ‘slaughter’ the troll, the ‘scum of the earth.’ And in August, he pledged $1 million of his own money to fight the troll that went after his company.” PandoDaily, which bills itself as “the site of record for Silicon Valley,” is published by the Application Developers Alliance, and features a section called “Patent Troll Smackdown.” Pando investors include: Marc Andreessen, Peter Thiel and who’s who of Silicon Valley investors.

The founder of FindTheBest, put that money to use by making a claim that the NPE that came after it is so reckless, it has engaged in outright extortion, violating federal racketeering or RICO laws.

Fringe Elements

A veteran IP executive told IP CloseUp that O’Connor’s allegations focus on a few exceptions, not the general rule. “We need to accept that there are bad actors in the patent space, but they are lot fewer than some would like to believe. We need to agree that demand letters from people like those described in the article about FindTheBest represent a fringe element in the patent world that drags everyone down.

“At least one historical ‘black hat’ patent monetizer I have worked with,” continued the exec, “has actually become more of a ‘grey’ hat, and now includes a number of Fortune 500 companies as clients. The firm sends out a lot of demand letters, but these usually are notifications of believed infringement of a particular patent without a settlement number associated with them. There is always 100% willingness to litigate any letter. The average settlement size today for this patent licensing business is around $1 million, more than 90% come after significant time in litigation. Rarely does it send a letter to company that has less than $100MM in revenue.

“What is described in the [Ars Technica] article is far beyond anything even the most aggressive NPE would do. With use of a RICO action, the sort of ‘shakedown’ behavior suggested by O’Connor as standard operating practice of companies like Acacia, WiLan, IPNav, Mosaid, etc, is simply untrue. I know first hand that they are far more sophisticated in their business practices than O’Connor would lead us to believe.

“It concerns me,” said my source, “that if we don’t identify and isolate the problem, every patent holder wishing to enforce, including operating companies, will be painted with the same brush.”

The Economics of Patent Litigation

The quality of patents held by NPEs that settle disputes quickly are often considered suspect, even by some other NPEs. Many believe that if they had the goods, they would fight to the death.

Truth be told the evolving economics of patent litigation has made it more impractical than ever to engage in protracted disputes, no matter how strong the patents may be or obvious the infringement. If the holder gets a favorable Markman ruling, defining the scope of the case, it still has several expensive and time-consuming hurdles to surmount before winning damages or attaining a settlement. Defendants today are in a better position than ever to effect early settlements.

In recent years, many damages awards have been reduced, retried or simply thrown out by the court or on appeal. While a patent infringement may be worth $10 million or even $100 million, it does not mean that the plaintiff will be able to collect that amount. It is a matter of the cost of capital and risk of time and money. For most, IP licensing is a business, not a religious war.

A $1m license or settlement is worth $10m or even $100m only if the stars and planets align. Given the cost of capital, time and the statistical risk of patent litigation (a large percentage of big awards are never paid), it makes business sense for many patent holders whose rights are infringed to take a reasonable settlement and move on.

50 Shades of Black

Similar in noise-level to Lewis Cheng, Chief Legal Officer of Newegg,another angry online business executive fearful of e-commerce or other patents undermining his (likely unprotected and under-licensed) business, the rhetoric is born more of defensive IP strategy than higher legal authority.

Concludes O’Connor: “There’s a lot of outrageous stories, but everyone’s so damn afraid of coming forward—It’s like going against the Mafia,” he said. But the idea that trolls may retaliate against those who speak out against them is at best far-fetched. . “If they want to try to teach me a lesson, go for it. This will be my retirement. I’ll fight them.”

“Retaliation?” No one I know, or have heard of, has ever suggested it. O’Connor’s spewing this nonsense does more to show the weakness of his IP hand than his courage as an entrepreneur.

Less Than Meets the Eye

According to Forbes, Kevin O’Connor’s DoubleClick survived after the bubble popped despite losing 75% of his customers. The company sold to private equity firm Hellman & Friedman in 2005, which then resold it to Google in 2007 for $3.1 billion. FindTheBest, an online comparison engine he runs, is backed by Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers. O’Connor is co-author of The Map of Innovation, Creating Something Out of Nothing. [I would elaborate, but it seems unnecessary.]

Apple’s high-profile and short-lived win against Samsung may turn into the licensing agreement that it should have been in the first place.

On Friday Judge Lucy Koh halved the $1.05 billion award that a San Jose, CA jury provided Apple for Samsung’s infringement of 14 of its patents. Judge Koh also ordered the damages portion of the case be retried, while allowing the infringement decision to stand.

In her decision Judge Koh said that “the Court has identified an impermissible legal theory on which the jury based its award.” Apple is headquartered in nearby Cupertino.

Until now, Apple had appeared to have won a significant victory in the case, even though it failed to win an injunction that would have shut down sales of Samsung’s popular Android phones. The N-CA district court’s ruling is a reminder that Apple’s infringed patents, while worthy, have a lot less damages value than they at first appeared to.

The court’s decision looks to be part of a larger pattern of vacating mega jury awards, such asJ&J Centocor (J&J) v. Abbott, $1.7 billion andLucent v. Microsoft, $1.5 billion. These cases, and many on the list of top all-time patent damages awards, have either been overturned or dramatically reduced.

Why Bother?

Why bother to file a patent suit in the first place if winning a really big damages award frequently amounts to little more than an initial or Pyrrhic PR victory? Perhaps that’s the message the courts want to send — don’t bother. For Apple the initial positive media coverage may be a sufficient spoil to justify the time and cost. Its limited win sends a message: “If competitors infringe our patents we will pursue them. Money is no object.” It also implies that while Apple may not have as many patents as other tech giants, such as Samsung, Sony or IBM, theirs are strong rights and it will vigorously will defend them. (Microsoft pursued a similar strategy in the 2000’s after a series of costly patent losses and settlements.)

* * *

Back in September I had suggested in IP CloseUp after Apple and Samsung was decided that the result amounts to little more than posturing between the two dominant electronics players hoping to convey the existence of a competitive landscape. The fact is that after these two companies there effectively is no smartphone landscape, and, let’t not beat around the bush, they would not mind keeping it that way. It’s not unlike organized crime families taking out each other’s capos in a turf war. Does it really matter who wins?

The retrying of damages may result in a local jury finding somewhat higher award than Judge Koh currently suggests, or possibly a lower one. The risk of a new and potentially embarrassingly low revised damages award may encourage Apple to finally agree to a license with Samsung before the retrial concludes, which it might have done in the first place. Although having done so too quietly may have been regarded as collusive by others who wish to participate in the smartphone sales, like Nokia and RIM.

The Joke’s on Who?

The public spectacle of Apple v. Samsung is a bit laughable. It makes the two companies appear to be enemies when they may, in fact, be helping each other carve up the smartphone space. IP CloseUp readers already know, Samsung is Apple’s largest parts supplier.

“Samsung turns out to be a particularly important supplier,” wroteThe Economist. “It provides some of the phone’s most important components: the flash memory that holds the phone’s apps, music and operating software; the working memory, or DRAM; and the applications processor that makes the whole thing work. Together these account for 26% of the component cost of an iPhone.”

Last year Apple spend $3.9 billion on Samsung custom chips alone, according to IC Insights data.

I guess you could say that innovative IP strategies often are the most effective ones.

For the latest news on patent licensing companies click below:

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Follow IP CloseUp

Follow us on Twitter & LinkedIn & Facebook

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

About Bruce Berman

I'm a long-time intellectual property observer, adviser and editor, who is in close close contact with the leading holders and most influential people. I track the latest trends and developments, and monitor patent and other IP transactions, strategy and performance.

Since 1988 I have been working with IP holders, managers, lawyers and investors to properly explain the importance of their assets to key audiences, frame disputes and convey transactions.

My five books, including the IP best-seller FROM IDEAS TO ASSETS, deal with IP rights as business assets. THE INTANGIBLE INVESTOR, the column I have been writing for IAM Magazine since 2003, looks at ways IP rights impact stakeholders. For my complete bio visit www.brodyberman.com or click on the link below.